Foreign Policy Problems Mount For The U.S.

Politics, Geopolitics & Conflict

In a major loss for U.S. foreign policy, the Saudis have agreed to join the Shanghai Cooperation Organization (SCO) as a "dialogue partner" as it moves to further cement ties with China. The SCO includes India, Pakistan, Russia, Iran, and Central Asian countries. Egypt and Qatar also have "dialogue partner" status. What we're seeing now is a bit of a payout for Beijing after it brokered a restoration of diplomatic ties between Saudi Arabia and Iran earlier this month. It also comes right after Saudi Aramco and China signed off on billions of dollars in investments earlier this week.

Israel's Netanyahu threatens to be a very disruptive force in the Middle East, but he is also potentially overplaying his hand domestically and with Washington. The hardline PMs moved on Monday to delay a controversial plan to weaken the country's judiciary. The judicial overhaul decision could be his undoing. He has only two options: Either side with his coalition and allow the overhaul and face mass protests, or forgo the overhaul and watch his coalition fall apart.

Russia's military superiority has so far failed to take the eastern city of Bakhmut, the new symbol of the Russian front line in Ukraine. The Russian military, in a nutshell, is not faring well in an urban warfare setting, though on Wednesday, Ukraine said Russia had made some progress in advancing. Neither side has control here. Overall, however, Russia's strategy is overly reliant on tactical weapons and heavy artillery. In the meantime, Kremlin spokesman Dmitry Peskov on Wednesday "predicted" a long hybrid war against the West.

China and the Philippines are set to hold talks in May about the joint exploration of oil and gas in the South China Sea in what looks to be an easing of tensions between the two over how to exploit the area's natural resources. The Philippines said the talks would begin at the technical level. China has laid claim to jurisdiction over most of the South China Sea, creating roadblocks for the Philippines in finding investors to explore the area for fossil fuels. Talks have sprung up in the past and then fizzled out, and an arbitration court has ruled in the Philippines' favor, without affecting much. China has previously said it was willing to discuss only those areas that are not in dispute.

Deals, Mergers & Acquisitions

A consortium led by Canadian Brookfield Renewable Partners has agreed to purchase Australia's utility Origin Energy for a total of $10.21 billion, which includes an energy markets business, power generation, retail, and a stake in Australia Pacific LNG in Queensland. The target time frame for closing the deal is early next year. The consortium said it intends to reduce Origin's carbon emissions and invest some $20 billion in new build renewables and storage.

Energy Transfer Lp will acquire Permian-based pipeline operator Lotus Midstream in a $1.45 billion cash-and-stock deal ($900 million in cash and approximately 44.5 million newly issued shares). Energy Transfer's pipelines have a capacity of nearly 1.5 million barrels per day, covering major production areas of the Permian. The deal is set to increase Energy Transfer's storage capacity in Midland, Texas, by 2 million barrels.

Liontown Resources has rejected a $3.7-billion acquisition bid from giant Albemarle, the world's top lithium producer. Liontown itself is an early-stage lithium project in Australia, which already has offtake deals with major automakers. Why did Liontown reject the deal? Because it foresees fivefold growth in global lithium demand by 2030 and a supply deficit that will make it worth much more than it is now. Indeed, shares surged on the rejection.

In a bid to expand its oil and gas portfolio, state-owned QatarEnergy is acquiring two Canadian offshore exploration blocks from Exxon off the coasts of Newfoundland and Labrador.

British BP and Abu Dhabi's state-owned ADNOC have made a non-binding offer to acquire 50% of Israeli offshore natural gas producer NewMed Energy (formerly Delek) for around $2 billion. NewMed owns a 45% stake in the giant Leviathan gas field, and a 30% stake in the Aphrodite gas field, located offshore Cyprus.

The Biden Administration is moving forward with auctioning off 73 million acres in a Gulf of Mexico offshore oil and gas lease sale. The area up for grabs is more than double the acreage involved in the Willow Project, which the Biden Administration recently approved. The GoM sale was part of a deal struck with Senator Joe Manchin, who added it to the Inflation Reduction Act. Of the 73 million acres on offer, oil and gas companies have shown interest in 1.6 million. Lawsuits have already been filed by environmental groups to stop the lease sale.

Norway has opened its first acreage for tenders to build fixed-bottom offshore wind farms at Soerlige Nordsjoe II phase 1, a 235-square-mile project in the North Sea. The government is offering a contract for 1.5 GW of turbine capacity, or enough wind power to supply 460,000 homes. The tender will be awarded to a single consortium. Other bidding licenses were opened as well.

Discovery & Development

Shell will not move forward with a biofuels production project in Singapore, it said this week. Shell will also not move forward with a base oils plant there. Shell did not elaborate on the reasons behind its decision. In 2021, Shell announced it would build a biofuels plant in Singapore to help the company meet its target of cutting its emissions in half by 2030. Shell said at the time that the plant would be capable of producing 550,000 tons per year, making diesel and aviation fuel from cooking oil and animal fats.

The UK Infrastructure Bank will invest $246 million in energy storage for the energy transition. Energy storage is an essential component of the UK's energy plans to reach net-zero emissions by 2050 to balance power during lulls in wind and solar power.

CNOOC doubled its net profit in 2022 from a year earlier to $20.57 billion on higher oil prices. Total oil and gas output for the year was 624 million boe-an 8.9% annual increase. CNOOC's all-in costs were $30.39 per barrel last year, up from $29.49 per barrel in the year prior. CNOOC is targeting a new record for its oil and gas output this year, expecting to reach between 650 million and 660 million boe. It is aiming for a 6% annual production growth by 2025 when it expects output to reach 2 million boepd.